The BIR Form 1601C is listed as one of the Bureau of Internal Revenue (BIR) tax returns in our blog post 4 Common Tax Deadlines MSMEs should remember. Now, let’s dive deeper into the details.
Understanding the tax returns can save you from potential headaches down the road. That’s why we prepared a comprehensive guide that only requires a little bit of your patience and some organized record-keeping. Remember, the more you know, the less intimidating it becomes.
What is the BIR Form 1601C?
The BIR Form 1601C also called Monthly Remittance Return of Income Taxes Withheld on Compensation is the tax form used to file for Withholding Tax on Compensation (WTC).
WTC is the monthly tax deductions made by employers on the salaries and wages before paying their employees. This withholding process is implemented to streamline the individual income tax collection process of the BIR. WTC is NOT a tax on your business. It is a tax imposed on the income of your employees. You, as the employer, are simply collecting it on behalf of the BIR, instead of your employees paying it directly.
How to compute the WTC?
The amount of WTC is computed per employee through the steps that follow:
Step 1. Determine the total compensation
The BIR defines the terms compensation or wages as all remunerations for services rendered by an employee to their employer. The BIR classified the compensation for the purpose of WTC into:
Regular Compensation – this includes the basic salary and other fixed allowances of the employee and;
Supplementary Compensation – this includes the following:
Commission
Overtime pay
Fees, including directors fees
Profit sharing
Monetized vacation leave in excess of ten (10) days
Sick leave
Fringe benefits received by rank-and-file employees
Hazard pay
Taxable 13th month pay and other benefits
Other remuneration received from an employee-employer relationships
The above basically means ALL compensation and benefits you give to your employees regardless of what you call it. List all these then proceed to Step 2.
Step 2. Determine the taxable compensation
The total compensation of your employees is not automatically taxable. You can deduct their non-taxable or exempt compensation to arrive at their taxable compensation.
Non-taxable or exempt compensation normally includes the following:
Employee’s share on the mandatory government contributions such as the Social Security System (SSS) contributions, Philhealth contributions and the Pag-Ibig or the Home Development and Mutual Fund (HDMF) contributions;
De minimis benefits;
13th month pay and other benefits up to Php 90,000 in total for the year; and
Other non-taxable or exempt compensation as explicitly indicated in the National Internal Revenue Code (NIRC or Tax Code) and other pertinent laws.
It is also important to note that you are not required to withhold tax on compensation for employees who are minimum wage earners.
Step 3. Determine the WTC using the Withholding Tax Table
The Withholding Tax Table is provided by the BIR. The WTC from January 1, 2023 and onwards is shown below.
We’ve also prepared a printable withholding tax table; you may download it through this link.
See example below to see how to apply Steps 1 and 2, and how to use the Withholding Tax Table in Step 3.
Example
Employee A is paid monthly and earns a basic salary of Php 25,000 per month with no other benefits. She has the following government contributions based on her monthly salary:
SSS: Php 1,125.00
Philhealth: Php 500.00
Pag-Ibig: Php 100.00
Total: Php 1,725.00
*The above amounts are taken from the contribution tables provided by SSS, Philhealth and Pag-ibig.
Let’s apply the steps above in computing for the WTC of Employee A.
Step 1 – The total compensation is her basic salary of Php 25,000 since she doesn’t have any other benefits.
Step 2 – The non-taxable compensation of Employee A is her total government contributions. Her taxable compensation is:
Php 25,000 – Php 1,725 = Php 23,275
Step 3 - Per Step 2, Employee A has a taxable compensation of Php 23,275. In the withholding tax table, Employee A falls under the compensation range of “Php 20,833 - Php 33,332”. Under this range, the withholding tax shall be Php 0.00 + 15% over Php 20, 833. So, the computation will be:
WTC = 0 + 15% * (23,275 – 20,833)
WTC = 0 + 15% * (2,442)
WTC = 0 + 366.30
WTC = 366.30
The amount you will withhold from Employee A will be Php 366.30. Her net pay is then computed as follows:
Total Compensation (Step 1) Php 25,000.00
Less:
Government Contributions ( 1,725.00)
Taxable Compensation (Step 2) 23,275.00
Less:
WTC (Step 3) ( 366.30)
Net Pay Php 22,908.70
Continue this process for the rest of your employees. You will need to consolidate their total compensation, non-taxable or exempt incomes and their withholding tax on compensation then you’re ready to file your BIR 1601C.
The BIR, in its efforts to simplify the tax calculation process, also has a Withholding Tax on Compensation Calculator, an online application tool for calculating WTC designed to assist employers and employees in accurately determining the amount that will be withheld from salaries.
In using the WTC Calculator, you will have to input the amount in the boxes that corresponds to the details of the employee’s compensation.
Let’s plot the details given in the example above. First, you will need to enter the taxable compensation of Employee A.
Always make sure to select the correct payroll period applicable to your employee. In our example, it is stated that Employee A is paid monthly.
Next, enter the non-taxable compensation.
Then, on the bottom of the calculator, you will see a “Compute” button. Just click it and the WTC will be automatically computed.
Just remember, while online calculators can be useful tools it can also have its limitations. It will only rely on the data you have provided, so you will have to double-check the data you are entering to ensure its accuracy and completeness. If you're uncertain about any aspect of the computation or if you're dealing with a complicated compensation detail of employees, it's advisable to consult a tax professional for guidance.
When should you file the BIR Form 1601C?
The BIR 1601C is filed on a monthly basis. The deadline for filing is on or before the 10th day of the following month in which the taxes were withheld. For example, the form for the month of June (showing the amount of WTC made in June) is due on or before July 10.
How to file the BIR Form 1601C through eBIR?
The eBIRForm is a tax preparation software developed by the BIR. Yes! You no longer need to physically go to the BIR offices to file your tax returns. The eBIRForm allows taxpayers to fill up tax forms in an application and to submit them online instead of manually filling up the tax returns on printed forms. You can use the eBIRForm as long as you are not an Electronic Filing and Payment System (eFPS) filer. EFPS filers file their taxes online through the BIR eFPS website. They can digitally file their returns and make payments via their bank accounts connected to their eFPS account. You need to submit an application to the BIR and to your bank to be an eFPS filer.
After computing for the WTC of your employees, follow the steps below.
Step 1 - Download and install the latest version of the eBIRForms package from the BIR website Go to https://www.bir.gov.ph/, select “Use BIR Eservices” and then click the “eBIRForms” tab.
Step 2 - After installation, open the eBIRForms application on your computer. You will be directed to this profile page below.
Fill out the needed information. Make sure that your email address is valid since this will be used by the BIR to send the Tax Confirmation Receipt when you file using the eBIRForms.
Step 3 - From the list of BIR Forms, locate and select BIR Form 1601Cv2018 - Monthly Remittance Return of Income Taxes Withheld on Compensation (NEW). See below for your reference.
Click fill up. You will be redirected to the 1601C form.
Step 4 - On item 1 of the form, choose the applicable month. Notice that the other information is automatically filled up based on what you inputted under Step 2. Under the Part II of the form, Provide the required information in the corresponding fields of BIR Form 1601C.
Enter the total amount of compensation and the non-taxable compensations in the correct fields. Review the form to ensure all information is accurate and complete.
Step 5 - Click the "Validate" button on the lower portion of the form. This will help validate the completeness of the information you have entered in the form. The eBIRForm will then prompt a message if there are any errors; if there are, make the necessary corrections. Once the validation is successful, click save. This will save the form you filled up in the eBIRForm module BUT this does not submit the form yet.
Step 6 - To finally file your BIR Form 1601C, ensure to click the Submit button. Upon clicking, you will be redirected to a BIR message; confirm details (i.e., TIN, Email Address) if prompted so, then proceed.
To save a copy of your submitted form, you may click the “File” button on the top portion of the form then click Print, you may print it to have a physical copy or print it as a pdf file to retain a digital copy.
After filing, a tax confirmation receipt will be emailed to you through the email address you have entered in the profile page.
Keep in mind that you need to file the BIR Form 1601C regardless if there is a WTC that should be remitted or none. If there is no tax due however, there is no need to proceed to Step 7.
Step 7 - If there is a tax due, pay the amount through BIR-accredited channels. You may refer to this link for the list of authorized banks and payment channels.
Step 8 - Archive the submitted BIR Form 1601C, the tax confirmation receipt email and the proof of payment of tax due to serve as proof of your compliance. It is important to do this as your submission might not be captured properly by the BIR’s system and you might be subjected to penalties in the future. Remember, the burden of proof always lies on the taxpayer.
That’s it! Navigating through the tax forms can be overwhelming, but it's really doable. Just remember to keep your records organized, stay updated with any changes in tax regulations, and ask for advice from tax professionals when necessary.
Still have questions about BIR Form 1601C? Book an online consultation
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Disclaimer: Numbers that Matter Inc. aims to curate topics that are simplified and easily digestible for micro, small and medium enterprises, by balancing our technical know-hows as accounting professionals and the practical experiences of our team working on ground with our clients. There may be technicalities intentionally omitted from our content to preserve its simplicity. Any practical tip is purely the opinion of the team and is merely informal advice, and thus, should not be taken as a definitive rule. Should you have any specific questions, feel free to message the team at consult@numbersthatmatterph.com and we’d be happy to discuss with you further.
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